CNN RELIABLE SOURCES

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. HOWARD KURTZ, HOST: Raising McCain. The Arizona senator says the television networks are ripping off America, and he's taking on the broadcast lobby with legislation ordering free airtime for candidates. But should the government be telling the media what to do?

And playing defense. Is the wave of corporate scandals hurting the NBA president or is that a figment of the media's imagination?

Welcome to RELIABLE SOURCES, where we turn a critical lens on the media. I'm Howard Kurtz, and later in the program, are the media unfairly tying President Bush to business disasters from Enron to WorldCom?

But first, election season is just around the corner and that means lots of political commercials, but as broadcasters devote less time to covering campaigns, should the networks be forced to give candidates more time on the airwaves for free?

Senator John McCain says absolutely. He and Senator Russ Feingold are pushing legislation that would also order TV and radio stations to devote at least two hours a week to covering political races at election time, and he sat down with us to tell us why.

John McCain, welcome.

(BEGIN VIDEOTAPE)

JOHN MCCAIN, (R), ARIZONA: Thank you, Howie.

KURTZ: In pushing this bill for free air time, you are taking on the National Association of Broadcasters. Let me ask you a serious political question. What are you, nuts?

MCCAIN: They are the most powerful lobby in Washington.

KURTZ: Why is that?

MCCAIN: I think one of the reasons is, is because they can say we'd like for you to meet with the general managers of every television station in your state. You go into a room, hear the people that carry your message, and they never - they're very sophisticated. They're not saying do what we want done. Don't get me wrong, it's not that kind of a scenario, but it's very clear that these are the people that shape the opinion to a large degree of the people who are your constituents.

KURTZ: It's going to be awfully hard to beat in both Houses of Congress ...

MCCAIN: Yes.

KURTZ: ... a lobby that gives a lot of money and with that kind of clout. So ...

(CROSSTALK)

MCCAIN: In interest of straight talk, we had free air time in the original McCain-Feingold bill, but quickly realized that if we had kept it in, we'd never pass the bill.

KURTZ: Right. Now the major networks as best as I can determine have devoted zero airtime to this provision of yours, this new legislation. You hold a press conference. What do you make of that?

MCCAIN: Not too surprising, a little disappointing, but when we fought - when I fought very hard against the $70-billion spectrum giveaway, digital spectrum to the broadcasters, that received very little attention, in fact, no television coverage as well.

KURTZ: So here's a case of a special interest not focusing its usual spotlight on itself?

MCCAIN: I think that has to be partially the case or I'm unable to get their attention. But it's probably a combination of the two.

KURTZ: Now I'm the head of NBC, why ...

MCCAIN: Congratulations.

KURTZ: ... should we be able to reach - thank you. I promoted myself. Why should you be able to reach over and grab money out of my corporate pocket just because you want candidates to have air time? Why not pass a bill that would require the airlines to give free flights or the grocery stores to give free food to candidates? Why television?

MCCAIN: That's really the important part of the question and a legitimate one. When every broadcasting station obtains a license - obtains a license to use the spectrum that carries their message over the air, they sign a document that says that in return in for the use of that spectrum they will act in the core public interest.

This is what generates many of the public service announcements, many of the other things, particularly if you're an insomniac and watch during the wee hours of the morning. But, and we believe, Russ Feingold and I and others believe that they use this spectrum, they agree to act in the public interest, what could be more in the public interest than have some time devoted to political campaign, the election of president of the United States and all of the local officials.

Finally one other point, several years ago they got $70 billion and that was a conservative estimate of digital spectrum, in return for which they were supposed to give back their analog spectrum. They're not about to do that. They got $70 billion of something for free. If some entity got $70 billion worth of land in Arizona, everybody would be up in arms. I mean they'd go crazy.

KURTZ: But do most people not know ...

MCCAIN: Most people, they don't know.

(CROSSTALK)

MCCAIN: They don't really ...

(CROSSTALK)

KURTZ: ... a nice gift from the ...

MCCAIN: ... because they can't see it. They can't feel it. They can't walk on it.

KURTZ: Right.

MCCAIN: So they don't understand how what an enormous giveaway this was and by the way, there was a Pew (ph) research study not too long ago that showed that the coverage by television stations of political campaigns was on a steady decline.

KURTZ: Obviously producers and executives concluding that that's not the way to get big ratings. But now ...

MCCAIN: Good point, that's a good point, and that's why it's up to us and them to try to make it more interesting for the viewers and so that they will be watched.

KURTZ: On the one hand your legislation would mandate a certain amount of free air time for candidates to come on and deliver a commercial, get their message out. But you also would require television and radio stations to devote I think it's two hours of coverage in the final month of the election to political debates, campaign, and so forth. Who made you the nation's editor-in-chief? Now you're getting into editorial decisions.

MCCAIN: Well I think that's a good point. We'd be glad to negotiate that. That's just the opening bid here. We had to start somewhere by saying you got to give a certain amount of time.

(CROSSTALK)

MCCAIN: And I've been consulting with lots of people ...

KURTZ: Right, but philosophically, isn't that the federal government sticking its big fat nose into private First Amendment decisions by private companies? MCCAIN: If it were not for the fact that the broadcasters are using a government/taxpayer's asset. That's the basis of our whole argument, and the reason why we're not requiring, trying to require newspapers or magazines or any other material that doesn't use -- any other entity that doesn't use the taxpayer's own spectrum or anything else owned by the spectator, the taxpayer will be OK for use.

KURTZ: Now in a recent Pew poll, 73 percent said they favored free air time, but they'd probably favor free food as well. But ...

(CROSSTALK)

KURTZ: ... will that help you if this becomes a big battle on Capitol Hill? I don't even know ...

(CROSSTALK)

KURTZ: ... you're going to get a vote on this bill.

MCCAIN: Oh, I don't think we'll get a vote right away. I think it's going to be a struggle and it's going to take several years, and there'll be a lot of compromises along the way. But you know the broadcasters should be a bit embarrassed that the coverage of political campaigns by the stations has declined rather than at least stayed the same or increased.

There must be some feeling of obligation there that - and one of the things that we want - did in the six hours thing is shape it however you want. You want - if you want two minutes out of the evening news and let one candidate say something one night and another one the other night. I mean do however you think best so you can attract the most viewers.

KURTZ: Right. I know clearly it will cost them some money because they could have sold some of that time to ...

MCCAIN: Absolutely.

KURTZ: ... advertisers.

MCCAIN: Absolutely.

KURTZ: Let's talk a little bit about fair and unfair journalism. With all the corporate scandals now all around us - Enron, Global Crossing, Tyco, Martha Stewart, now WorldCom, some in the media are saying, well, this is because of industry contributions to the Bush campaign resulting in lax federal regulations. Is that a fair or unfair thing for journalists to say?

MCCAIN: I think that so many of these contributions create the impression of impropriety and it taints all of us. I received significant contributions from Global Crossing.

KURTZ: Thirty-one thousand dollars, I was going ...

MCCAIN: Yes. KURTZ: ... to bring that up.

MCINTYRE: Yes. Yes, for example, and I'm glad I beat you to the punch. The - so it creates the appearance of impropriety, but I think an objective observer would probably argue a lot of the practices that have gone on that are now being brought to light were brought on even before many of these contributions were given. But it does make us vulnerable to criticism and ...

KURTZ: You're saying whether the president or a senator or a member of the House actually tried to do a favor for these companies or not crack down - they would not crack down on accountants like Arthur Andersen, it smells bad; it looks bad.

MCCAIN: It smells bad and there is one selling point here and that is that Mr. Levitt when he was head of the Securities and Exchange Commission, tried to get changes in regulations to tighten up and the Congress of the United States even threatened to cut off his money for his agency. Now that is a smoking gun.

KURTZ: Yes, the media, I think, didn't do a terribly good job of covering those fights at the time, although now obviously all of these WorldCom type scandals are front page, top of the evening news. Before you go I've got to ask you, what is this strange hold you have on reporters? A lot of people felt during the 2000 campaign that the journalists riding your bus just fell in love with you.

MCCAIN: I believe that it was the greatest experience of my life in that I was able to get my message out. I also point out there's a danger to that because there were several times when I said things that I shouldn't have said because they were with me all the time.

KURTZ: Eight to 10 hours a day, you were ...

MCCAIN: Yes. Yes.

KURTZ: ... talking to the press.

MCCAIN: And they accurately, not inaccurately, but accurately reported what I said and I suffered from it. But the overall product was something that I was able to explain exactly how I felt on issues to the reporters and I know this is a terrible thing to say, this is the greatest sin of all. I really got to like some of those people because they are professionals in their business and I was privileged to know some of the people that were really at the top of their profession, just as I've had the privilege of knowing some Arizona Diamondbacks that are at the top of their profession as well.

KURTZ: Just briefly, both the "New Republic" and the "Washington Monthly" say you should run for president in 2004 as a Democrat. I know you're not going to do that. You've said you're going to stay in the Republican ...

MCCAIN: Vegetarian.

KURTZ: Vegetarian ticket? MCCAIN: Yes.

KURTZ: But are you hypnotizing these people? Liberal magazines coming out for John McCain?

MCCAIN: I think you could define motives for that more than I can, but sometimes it's a way to keep circulation up.

KURTZ: OK, I'll use your translation. You're a good copy.

MCCAIN: I'm flattered.

KURTZ: Senator McCain, thanks very much ...

MCCAIN: Thank you.

KURTZ: ... for joining us.

(END VIDEOTAPE)

KURTZ: When we come back, is President Bush getting a bum rap from reporters over the growing list of corporate scandals? That's just ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ...revelations at WorldCom has misaccounted $3.4 billion is outrageous. We will fully investigate and hold people accountable for misleading not only shareholders but employees as well.

(END VIDEO CLIP)

KURTZ: President Bush talking about the WorldCom debacle last week and joining us now two White House correspondents, Dana Milbank of the "Washington Post" and Martha Brant of "Newsweek".

Dana Milbank, you wrote the other day that these mounting corporate scandals might scratch Bush's Teflon, but why report it before it happens? Wishful thinking on your part?

DANA MILBANK, THE "WASHINGTON POST": Each time one of these things happens we write a little piece of how this could hurt Bush and nothing's hurt him so far.

This may be a little different because even some people in the administration say they're beginning to be sort of a critical mass here and this is really an Achilles heel for the Bush administration because of their corporate ties. And you can see how furiously they've been reacting to try to prevent that from happening, which shows some anxiety there.

MARTHA BRANT, "NEWSWEEK": Absolutely. Any time the president says anything unprompted as he did in Canada recently, you know this is something he really goes to get ahead of. Have they mastered it? I don't know.

Paul Krugman's column was really kind of -- we are lemmings in the press, for better or for worse, and that column reopened a chapter that they wished was behind them during the campaign. We talked about his own SEC filing ...

KURTZ: Let me take a second to explain.

BRANT: Sure.

KURTZ: This was Paul Krugman in "The New York Times", also "Salon" magazine resurrecting a 1989 incident in which the SEC looked at George Bush's sale of stock in Harken Energy while he was a director of that company. He was ultimately cleared by the SEC. This was 13 years ago. Is it fair for the press to resurrect that now?

BRANT: Absolutely, because when the president says he's outraged, which he says all the time about this and now he's about to present his own formula for solving these problems, these corporate malfeasants and he's going to say that CEOs should give, you know, within two days, they should give notice that they've sold stock when he himself took weeks, if not months, to report in his own case. That's not going to ring true for people. It's a PR problem.

KURTZ: But where is the evidence, Dana Milbank, that George Bush's history as an oilman or his contributions from industry have anything whatsoever to do with the misaccounting (ph), as he put it. Other people would call it evidence of fraud at WorldCom, at Enron, at Arthur Andersen, Tyco, Xerox. I mean these things - this has been going on for years, why ...

MILBANK: Right.

KURTZ: ... blame the president?

MILBANK: It's not really a guilt by association thing so much. What - the issue here is it's sort of what we call a bank shot, that it's not the corporate scandals that's the problem for the president. The corporate scandals are causing a big problem in the stock market, which is reverberating through the economy and that in turn affects jobs.

The president makes the link directly. He says this corporate governance is hurting our job base. The president's not worried about WorldCom. The president's worried that he's going to be blamed for a weakening economy and that's why they're getting furious in their response.

KURTZ: Any downturn in the economy will hurt any president, just as presidents get blamed, get credit when the economy is going well. But isn't there a media subtext here? The narrative for Bush has always been in the pocket of big business and so forth. Isn't there - you call it a bank shot. I would say isn't the press trying to rope him into these corporate scandals?

BRANT: Well look, there's always a stereotype that the GOP is in bed with big business. I mean and sometimes that stereotype is rooted in some truth, and I think it's fair to probe these issues. You know people who looked at the case back during the campaign, it never got any traction and that's probably because there's nothing there.

And as you said, the SEC cleared him, but it is a valid point, given the context of all this corporate malfeasance, to go back and ask these hard questions of Bush and the vice president. Obviously Halliburton, there are issues there as well.

KURTZ: But another subtext is Bush has appointed, as Democrats would put it, a bunch of regulatory foxes to be in charge of the chicken coop and they're not cracking down. But the problem with that storyline is that a lot of this misaccounting, this hiding, inflating of profits and hiding of costs took place during the Clinton administration years, which they also didn't crack down on this sort of ...

BRANT: Which is why you see the Democrats treading cautiously. They know that this can come around and bite them as well.

KURTZ: They get plenty of contributions from these companies as well.

BRANT: Absolutely, they do, and so they've been very careful not to cry out too loudly. But because the Democrats have so few issues to hold on to, this maybe is the one thing that they feel can dent the armor. We'll find out.

MILBANK: The danger is that it be - that it spreads to a wide range of areas and the Democrats are able to launch sort of a populous attack and say it's not about WorldCom. It's about Enron. It's about prescription drugs and essentially echoing Al Gore's "we're for the people, he's for the powerful".

True or not, it, as Martha was saying, always the polls show people are always skeptical of Republicans for that reason. So it's always a danger.

KURTZ: Do you think it was fair for reporters Wednesday to pepper Ari Fleischer with questions about this 1989 SEC case involving George W. Bush?

MILBANK: Well, certainly it's fair and the same thing happened with Enron. It was or we saw this whole GAO, the government investigating the administration's energy ties completely die down, but revived again when the Enron scandal broke. It's all a matter of context. These things may not matter on their own, but when it suddenly touches the issue of the moment, of course the journalists are going to pile on and why not.

KURTZ: Now conservative commentators, Martha Brant, Rush Limbaugh and others, have tried to blame some of the recent corporate scams and meltdowns on Bill Clinton. They say well he set a bad example for the country. He showed he could lie and get away with it, so is that a reverse kind of "let's drag in the political figure we don't like and pin the tail on him." BRANT: I think that's a ridiculous argument, that somehow, you know, tying in these moral - I - you know I love it. Ben (ph) - the WorldCom ...

BRANT: I just - I think that is a ridiculous argument to try to link the two. Certainly malfeasance is malfeasance and there is a moral element to this, but I just think dragging in, you know, Bill Clinton and saying well, he got away with it. Therefore, this - you know we should be looking the other way and this, you know, corporate malfeasants, which are - yes I see the connection, but I don't think that that's a reason that we should be letting these guys off the hook.

MILBANK: They're trying to - and some people in the White House have made this case privately really, but they're trying to say it was all about this era of irresponsibility, which we are now fixing. The problem with these developments with the - with Harken and such is that you have senior people in the administration saying hey, come on, it's like driving 60 in a 55-mile zone. Well that may be true for all of us, but when you're presenting yourself as the straight arrow administration in response to a scurrilous administration you can't exceed the ...

(CROSSTALK)

MILBANK: ... speed limit by five miles.

KURTZ: OK. Also they haven't quite fixed -- the tougher regulatory reforms have not yet come. Now in the time that we have left, I wanted to turn to this great dramatic media story about the president transferring his power constitutionally to the vice president. Wasn't this kind of a media stunt in which a routine colonoscopy, not pleasant for the patient, but nevertheless it's done millions of times a year, was somehow used to dramatize the war?

BRANT: Well ...

KURTZ: Didn't the press fall for this?

BRANT: Look, I mean anytime there's a story, I mean where the president is going to go under and he's going to have some kind of invasive surgery, anything, it is a legitimate story ...

KURTZ: That's a story.

BRANT: ... and he did - he did transfer power, although not entirely. I think it's more the game of sport that we play at the White House, which is it makes the president incredibly uncomfortable to have to talk about this kind of stuff and so there is a little bit of an element of "got you" in making him talk about his colonoscopy as he's walking to the chopper to go to Camp David. There's a little side of the reporter who kind of likes to see him twist in the wind because he hates talking about this stuff so ...

KURTZ: Katie Couric ...

BRANT: ... much.

KURTZ: ... didn't have any problem talking about it. Did you think the whole transfer of power business was overplayed ...

MILBANK: It was overdone and I was frankly very surprised when the president walked out and said one of the reasons I'm doing this is because this is a time of war. Now he was talking about the transfer of power. I thought he was talking about a colonoscopy and perhaps we all should be doing this for the betterment of our nation. But it struck me as a little bit of a stretch, but and I was surprised truthfully at the way the media pounced on it. I said now this sounds just like what Ronald Reagan did, but I guess we're just hungry for news of the summer.

KURTZ: I do want to observe that the Cheney presidency was very successful. Nothing went wrong on his watch and I ...

MILBANK: One hundred percent.

KURTZ: ... think it should be recorded for history. Dana Milbank, Martha Brant, thanks very much for joining us.

Just ahead, "The Back Page".

(COMMERCIAL BREAK)

KURTZ: Time now for "The Back Page". Here's Bernard Kalb.

(BEGIN VIDEOTAPE)

BERNARD KALB, CNN CORRESPONDENT (on camera): You might call the media a national diary, keeping a record of how we live, what we do, how we feel. But this time the entry for the Fourth of July isn't quite the same as it's been for the last two centuries.

(voice-over): Celebrations, yes, small town parades, and big city fireworks and, oh, yes, that world champion who gobbled more than 50 hot dogs in 12 minutes. But this time and for the first time, a July 4th stalked by the threat of terror, pursued by the uneasy knowledge that all these bombs later, we still don't know whether he is alive or dead.

BUSH: We love our country only more when she's threatened.

KALB: So instead of that totally relaxed patriotism we know so well on the Fourth, our patriotism this time had an edge of defiance. "The New York Daily News" front page "A Very Special Fourth" and "The Washington Times" republished, lest we forget, the text of "The Declaration of the Dependence" with its call for fighting against evil -- that word that's back in the news 226 years.

For a moment there was a scare at LAX, three people killed in a gun battle. But on the morning of the Fourth some papers couldn't resist trying for a laugh or two.

"The New York Post" front page, this story about the heroic ex mayor of New York, "Independence Day, Rudy, Donna close in on divorce" and this cartoon in "The Washington Times", "I pledge allegiance to political correctness in America. One nation of special interest groups under a godless void with plea bargains for criminals and justice for sale".

And yet as the media roamed the country taking notes for the national diary, they found that freedom triumphed, jitters under control.

(on camera): That it was more than just a stiff upper lip, but rather what the levy was calling "patriotic exuberance" and pride and vigilance, America undiminished on the "star spangle" day of 7-4-02 without forgetting 9-11-01.

(END VIDEOTAPE)

KURTZ: Bernard Kalb. Well that's it for this edition of RELIABLE SOURCES. I'm Howard Kurtz. You can catch our program again tomorrow morning at 9:30 Eastern for another critical look at the media.

"CAPITAL GANG" is up next. Mark Shields has a preview.

MARK SHIELDS, HOST: Howie, on this Fourth of July weekend, Bob Dole joins us to talk about patriotism. CNN senior correspondent Nic Robertson reports from Afghanistan and the "Gang" will look at prospects for war in Iraq.

That and much more right here next on CNN.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com